Credit Crunch

24/02/2009   AIG seeks more federal rescue funds (23rd February 2009)

NEW YORK—American International Group Inc. will report a nearly $60 billion loss next week and is in discussions with the government to secure additional funds to keep operating after it issues its earnings report, CNBC reported Monday.

CNBC said that a loss of that size would likely result in downgrades in its insurance and credit ratings, forcing New York-based AIG to raise more collateral.

According to the report, the loss is attributable to writedowns on a variety of assets, including commercial real estate.

Talks between the government and AIG are focused on how the company can swap some of the debt held by the government for equity in AIG, CNBC said. The government already controls 79.9% of the company, which is the maximum stake it can have under current law.

The report says AIG's lawyers are preparing for the possibility of bankruptcy in the event the government talks are unsuccessful.

AIG said in a statement: "AIG has not yet reported fourth-quarter and 2008 year-end results. We continue to work with the Federal Reserve Bank of New York to evaluate potential new alternatives for addressing AIG's financial challenges. We will provide a complete update when we report financial results in the near future